Funding liquidity and equity liquidity in the subprime crisis period: Evidence from the ETF market
AbstractUsing index and financial exchange-traded funds (ETFs), this study explores the relation between funding liquidity and equity liquidity during the subprime crisis period. Our empirical results show that a higher degree of funding illiquidity leads to an increase in bid–ask spread and a reduction in both market depth and net buying imbalance. Such findings indicate that an increase in funding liquidity can improve equity liquidity, with a stronger effect for the financial ETFs than for the index ETFs. Our study provides a better overall understanding of the effect of the liquidity–supplier funding constraint during the subprime crisis period.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 36 (2012)
Issue (Month): 9 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
Funding liquidity; Equity liquidity; Collateral market; Interbank market; Subprime crisis;
Find related papers by JEL classification:
- G00 - Financial Economics - - General - - - General
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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